Cramer's game plan: Entering earnings season with more risk 'than I'd like'

Even though the stock market has recovered from its late 2018 lows, Wall Street might not be in the clear as it enters its next earnings season, CNBC’s Jim Cramer warned on Friday as stocks ended the week higher.

“Next week, we find out if this move’s been warranted based on earnings, not merely hope,” he said. “Fortunately, most stocks are still well off their highs, but they’ve rebounded enough that there’s a lot more risk going into these earnings than I’d like.”

Calling the past week “tumultuously positive,” the “Mad Money” host said next week “will be the craziest reporting period … you’ve seen in ages.”

Citigroup kicks off earnings season on Monday morning with its quarterly report. Cramer admitted he was “a little thrown off” by the big bank’s Friday note describing an information-sharing agreement with ValueAct, an activist hedge fund and one of Citi’s largest shareholders.

Still, “anything that allows ValueAct to put additional pressure on Citi is a positive,” he said. “The shareholders want growth, and Citi, like so many other banks, is growth-challenged. Maybe this strange ValueAct agreement can get them on the right track.”

J.P. Morgan and Wells Fargo: Cramer knows the potential pain points at these banking giants — a slowdown in lending and securities and J.P. Morgan and mortgage-related weakness at Wells Fargo — but he’s more interested in the positives that their earnings reports reveal.

“I want to hear their side of the growth story as both of these banks have a terrific handle on many different flavors of finance,” he said. “Both stocks are down enough that I expect that they can rally on even a little bit of positivity.”

UnitedHealth: Cramer expects massive health insurer UnitedHealth to deliver a great quarter, even as the company has been quite self-promotional in recent weeks.

“UNH has been talking up a blue streak about how well it’s doing,” he said. “The problem is I don’t know if management can ever top itself at this point. I don’t know if they can say anything new to propel the stock higher after its excellent forecasts for ages and ages.”

“Will United Continental tell us the same story when it reports?” Cramer wondered. “The airline group can’t get any mojo, but if any of them can buck the trend, it’s going to be United, which has been the best of the best since Oscar Munoz took over as CEO.”

Goldman Sachs: Cramer never thought he’d see the day when the cheapest bank stock would be that of his former employer, Goldman Sachs, which will report earnings Wednesday.

“A lack of growth combined with some disturbing news from a troublesome Malaysian transaction … has devastated the stock,” he said, adding that his charitable trust has been growing its position in Goldman’s stock.

“I do think it’s too cheap to ignore,” he said. “However, if they don’t at least try to quantify the damage from the Malaysia scandal, even a good quarter might not matter.”

Bank of America: This bank, on the other hand, could surprise to the upside on Wednesday with its quarterly results, Cramer said.

“I think BAC might surprise us given its gigantic asset base and the money it’s making off your deposits as the Fed funds rate goes higher,” he said. “CEO Brian Moynihan has made this bank more profitable than ever — and, by the way, he’s very digitized — but, like all the banks, it needs permission from the regulators to reward shareholders with larger dividends and buybacks.”

CSX: Former CSX CEO Hunter Harrison, who passed away in Dec. 2017, set this railroad operator on the right track, Cramer said ahead of CSX’s earnings report on Wednesday.

He “introduced discipline to an operation that seemed to have been … unruly in retrospect,” and now, “there’s been nothing but upside here,” the “Mad Money” host said. “I bet that trend continues.”

Morgan Stanley: The bank barrage continues Thursday with a quarterly report from Morgan Stanley, which Cramer argued could have “the biggest potential for an upside surpriser in the group.”

In addition to having the “healthiest buyback” in its sector, Morgan Stanley also has a great CEO, James Gorman, who “has navigated the regulatory thicket of banking better than any other executive,” Cramer said. “I think Gorman is content to buy back as many shares as possible while the stock is down here. You know what? I’d buy it right along with him.”

American Express: Shares of American Express are down ahead of the company’s earnings report, so Cramer will be looking for signs that business is still good at the financial technology giant.

“We need to hear that corporate travelers are still spending. I’m concerned given the weak air fares that we’ve been learning about,” he admitted. “What I most want, though, is something about China — specifically, their chances of getting a business license that lets AmEx expand into this massive market.”

Netflix: Netflix’s stock is already up 26 percent for 2019, so Cramer preached caution ahead of its earnings report.

“The analysts who cover this sock have been tripping all over each other to raise numbers and push the stock. I typically don’t like this kind of action, but Netflix is not your typical stock,” the “Mad Money” host said. “I expect good numbers, but at this point, the stock’s run too much for me to recommend buying it.”

VF Corp.: “The long knives are out” for VF Corp. because the Vans and North Face parent sells a good deal of its product to department stores like Macy’s, which seem to have fallen out of favor with investors, Cramer said.

“I think people are too negative. Plus, VF is doing everything it can to reward shareholders,” he argued.

Schlumberger: Cramer, whose charitable trust owns shares of Schlumberger, said he feels “like a dope” for continuing to own the oilfield service company’s stock.

“I made the mistake of betting on the best house [in] a bad neighborhood, the oil patch,” he said. “At this point, all I want to hear is that Schlumberger’s dividend is safe. Low bar. Even though I think oil did bottom in the mid-$40s, it hasn’t rebounded enough for SLOB, as we call it, to make a ton of money.”

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